Germany: industrial production rises more than expected

Car production line at the German manufacturer Volkswagen (illustration image). AFP - RONNY HARTMANN

Text by: RFI Follow

2 min

Unexpected improvement for the German economy. Industrial production, car sales, exports are on the rise in Germany. Experts expected the performance of Europe's leading economic power to be worse. A looming recession this year now seems out of the question.

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With our correspondent in Berlin, Pascal Thibaut

Manufacturers' order books remain full, the bottlenecks of past months with supply problems are dissipating for German companies. As a result, they surprised with a 2% increase in industrial production over one month while analysts expected stagnation.

The situation varies from one branch to another. The automotive sector is significantly supporting the current rebound with a 16% year-on-year increase in production in March. The second quarter should remain positive for German manufacturers. However, the significant decline suffered by this sector during the pandemic has not yet been made up.

This improvement can be explained by a number of factors: orders placed for some time can finally be processed through improved supply chains; The fall in energy costs after a peak last summer benefits businesses and individuals alike, although inflation is expected to reach 7% again this year. The tariff shield put in place by the government for industrialists and private individuals is having an effect in reducing the effect of energy price increases.

Adjusted forecast for 2023

Germany, an exporting country, is also benefiting from the reopening of the Chinese market, where severe health restrictions had slowed down the economy and hurt Europe's supply. Exports rose 4 percent last month compared to February, continuing a positive trend. The increase over one year is more than 7%.

These various indicators have led economic institutes such as the German government to correct their forecasts for 2023. The recession that was announced a few months ago (-0.4%) for 2023 now seems to be excluded. The German economy is due to record symbolic growth of 0.3% this year. The decline in gross domestic product in the last quarter of 2022 has therefore not been confirmed.

Risks remain with a possible slowdown in US activity, the fallout from the recent turmoil in financial markets and rising interest rates.

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Read on on the same topics:

  • Germany
  • Economy
  • Industry
  • Trade and Commerce